Cross-asset barometers
EU VIX Index (VSTOXX)
Copper / Gold Ratio
EU Peripheral Spread
Cross-Asset Insights
CONCEPT
The dashboard examines key sentiment indicators such as: (1) US & EU VIX which look at equity investor sentiment, (2) copper/gold which looks at the vibe in the commodity market, and (3) peripheral spreads indicating what's the feeling among bond investors in Europe. Together, they act as a barometer to capture investors feelings in different market pockets.
CURRENT READINGS
MARKET IMPLICATIONS
In general terms, positive sentiment drives positive asset performance while negative sentiment is evidently associated with poor asset performance.
More in detail, volatility negatively correlates with equities and tends to cluster in regimes. Higher volatility indicates rising tensions for equity investors (fear), while lower volatility indicates optimism or complacency (greed).
Looking at commodities, Copper is driven by global industrial demand, while Gold is a safe-haven asset driven by fear and falling real rates. The ratio between the two acts as a real-time barometer for global growth expectations. A lower ratio indicates that gold prices are rising faster than copper, which is normally (but not always) a sign of investor fear. Vice versa, a higher ratio indicates that copper prices are rising faster than gold, which is normally a sign of investor bullishness.
Finally, the spread between EU peripheral government bonds (Italy/Spain) and German Bunds reflects the perceived sovereign risk in the Eurozone. A widening spread signals economic instability in the block. Vice versa, a tighter spread indicates optimism.